November 20, 2017

EU Council adopts new rules to reduce financing of armed groups

On 3 April 2017, the European Union Council adopted a regulation aimed at stopping the financing of armed groups through trade in conflict minerals.

The regulation obliges EU companies to source their imports of tin, tantalum, tungsten and gold responsibly and to ensure that their supply chains do not contribute to funding armed conflict. These ‘due diligence’ rules will become binding from 1 January 2021, though importers are encouraged to apply them as soon as possible.

Tin, tantalum, tungsten and gold can be used in everyday products such as mobile phones, automobiles or jewelry. In conflict-affected and high-risk areas, armed groups often use forced labour to mine these minerals which they then sell to fund their activities. By ensuring product traceability, the regulation is aimed at cutting off a major source of their income.

The regulation carries clear obligations to source responsibly for the ‘upstream’ part of the production process, which involves the extraction and refining of these minerals. At least 95% of all EU imports of metals and minerals will be covered, while small volume importers will be exempt. The competent authorities will carry out checks to ensure that EU importers of minerals and metals comply with their due diligence obligations.

In addition, the Commission will carry out a number of other measures to further boost due diligence by both large and small EU ‘downstream’ companies, which are those that use these minerals as components to produce goods. The Commission will also draft a handbook including non-binding guidelines to help companies, and especially SMEs, with the identification of conflict-affected and high-risk areas.

The regulation builds upon 2011 OECD guidelines which set the international benchmark for supply chain due diligence. The text adopted by the Council results from an agreement reached with the European Parliament in November 2016, subsequently approved by the Parliament in a plenary vote on 16 March 2017.

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